Were beer-can openers furnished by a brewery to beer retailers self-consumed or resold?

Plain-English summary

A brewery originally furnished an opener with each case of beer and later supplied openers on request as customers accumulated them. It argued that the opener was necessary to open the cans and customarily accompanied the beer.

The memorandum accepted resale rather than self-consumption treatment. It noted that former Alcoholic Beverage Control Act section 55.7 prohibited alcoholic-beverage premiums or gifts, while the responsible division did not regard these openers as violating that rule.

Sales to on-sale dealers that used the openers to serve customers were taxable. Off-sale dealers were presumed to pass the openers to customers with beer. Because exact checking was difficult, the source recommended accepting the brewery's estimate that 10 percent of opener sales were taxable, unless audit staff had reason to doubt it.

Citations and references

• Former California Alcoholic Beverage Control Act § 55.7
• July 27, 1949 determination against the redacted brewery and related audit — determination and audit referenced but not reproduced in the official PDF
• Discussion with Mr. E--- R. H--- concerning the determination, brewery practice, trade custom, dealer uses, checking difficulty, and proposed 10-percent estimate — discussion summarized without date, notes, authority, or separate record in the official PDF
• Unidentified Alcoholic Beverage Control Division communication that furnishing beer-can openers did not violate section 55.7 — position stated without date, official, form, analysis, or separate record in the official PDF
• Brewery opener purchases, case-of-beer furnishing, later request-based supply, on-sale dealer use, off-sale dealer transfer, opener sales, and 10-percent taxable estimate — facts supplied; complete purchase orders, invoices, beer sales, opener distribution, dealer records, sampling data, calculations, and tax records not reproduced in the official PDF
• Official Annotation 280.0160's concise no-self-consumption summary — annotation omits the memorandum's on-sale/off-sale distinction and proposed 10-percent taxable-sales estimate and supplies no additional determination or audit record
• Possible estimate acceptance, determination adjustment, audit disposition, assessment, payment, refund claim, appeal, or other agency action — no follow-up or final outcome supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0160
• Original supporting opinion: 280.0160 PDF

Original ruling text

State of California

Memorandum

To:

Mr. Burnett Sheehan

From:

E. H. Stetson

Subject:

Board of Equalization

280.0160
Sacramento
October 2, 1950

Mr. E--- R. H--- has discussed with me the determination made against the above brewery on July 27, 1949. The only item remaining in dispute appears to be that portion of the self-consumed merchandise item representing ex-tax purchases of beer can openers. The audit does not state the reason for regarding these purchases as taxable, but presumably it was on the theory that they were given away. Mr. H--- tells me that originally the practice was to furnish an opener with each case of beer, but that as the customers’ supplies accumulated openers were furnished upon request to purchasers of beer. He also argues that the opener is necessary to the proper opening of the cans and that it is a trade custom that purchasers are entitled to openers. We believe that this argument is quite sound, particularly in view of the provisions of Section 55.7 of the Alcoholic Beverage Control Act, prohibiting any licensee from giving directly or indirectly any premium, gift, or free goods in connection with the sale of any alcoholic beverages. The Alcoholic Beverage Control Division has informed me that they do not regard the furnishing of these openers as in any way violative of Section 55.7. It would appear, accordingly, that we could very properly consider the breweries as in fact reselling the openers to their customers, and thus not be subject to tax measured by the purchase price as self-consumed merchandise. With respect to the breweries’ liability for sales tax on the theory that they are selling the openers, this would be true only with respect to sales to customers who use the openers, as, for example, on-sale dealers who use the openers to open beer cans for their customers. Off-sale dealers would presumably furnish the openers to their customers along with cans of beer sold to the customers.

Mr. Burnett Sheehan

-2-

October 2, 1950
280.0160

Mr. H--- is agreeable to regarding ten per cent of the sales as taxable on the theory that they are sales for use by on-sale establishments. He thinks this estimate is high, but is willing to make it sufficiently high so that there can be no question but what tax would be paid on all sales of the openers to on-sale establishments. He states that it would be very difficult to check this matter accurately. Unless you believe there is some reason to question the sufficiency of this estimate, we recommend it be accepted. If you wish to make any comments in connection with this matter, we shall be glad to give consideration thereto.

EHS:ph
cc:

280.0160.doc

Honorable George R. Reilly